Democratic Sens. Christine Rolfes and David Frockt speak to the media about a supplemental budget proposal in Olympia on Monday. (Rachel La Corte/The Associated Press)

Democratic Sens. Christine Rolfes and David Frockt speak to the media about a supplemental budget proposal in Olympia on Monday. (Rachel La Corte/The Associated Press)

State House, Senate Democrats unveil supplemental budget plan

By Rachel La Corte

The Associated Press

OLYMPIA — House Democrats unveiled a budget proposal Tuesday that sticks to an education funding timeline that the state Supreme Court has previously rejected and also includes a capital gains tax for long-term property tax relief.

The plan comes a day after Senate Democrats released their own proposal that doesn’t include new taxes and also complies with the court’s most recent ruling on when teacher and school staff salaries must be fully funded.

Both plans were expected to receive public hearings before fiscal committees Tuesday, and are expected to be voted off their respective floors Friday.

Negotiations to start

Then both chambers will begin negotiations to reach a final compromise plan.

The current 60-day legislative session is scheduled to end March 8.

House Democrats do want to invest additional money into education in the supplemental budget plan, but they say to change the time frame of the phased-in plan approved by the Legislature last year would put undue hardship on school districts. Instead, they transfer $1.1 billion into a separate education account to be used next year.

House Majority Leader Pat Sullivan said that the two-year phase in under the original plan made sense, and that the money the budget allocates on special education, guidance counselors and coordinators reflects the needs they heard from school districts.

“Our focus has to be on school kids,” Sullivan told reporters.

The state has been in contempt of court since 2014 for lack of progress on satisfying a 2012 ruling that found that K-12 school funding was not adequate. In November, the court said that a plan passed last year satisfied their earlier ruling, but the teacher salary portion needed to be fully paid for this year.

The court has retained jurisdiction in the long-running case, and gave lawmakers this current legislative session to get the work done, ordering them to present a report by April 9 detailing the state’s progress.

Under the plan passed by lawmakers during last year’s session, the education funding plan relies largely on an 81 cent increase to the statewide property tax that started this year. The court took issue with the fact that under the plan, the salary component wasn’t fully funded until September 2019.

The Senate plans to use much of a $1.3 billion projected increase in state revenues to fully fund the salaries by September of this year. It looks to tap into the rainy day fund to offer a one-time cut to the statewide property tax by 31 cents next year, dropping it from $2.70 per $1,000 of assessed value to $2.39.

The House looks to also tap into the rainy day fund — funded in part by the projected increase in state revenues — to drop the property tax next year to $2.39 per $1,000 of assessed value, followed by another drop in 2020 to $2.30.

After that, legislative leaders in the House hope to further drop property taxes to a projected rate of $2.20 starting in 2020 based a 7 percent capital gains tax on earnings from the sale of stocks, bonds and other assets above $25,000 for individuals and $50,000 for those who file jointly that would start in 2019.

About 48,000 people would be affected by the new tax, lawmakers said. Retirement accounts, most primary residences and most agricultural lands and most timber would be exempt from the tax, as would sale of cattle, horses or breeding livestock.

House Democrats introduced a capital gains measure last year but never brought it up for a floor vote. Democratic Rep. Kristine Lytton, chairwoman of the House Finance Committee, said this year is different because of the impact of property tax increases on homeowners, especially seniors.

“Our neighbors and our friends back home are really hurting from our property tax increase,” she said, her voice choked with emotion. “I have senior citizens who are just saying ‘we’re on fixed incomes. Your property tax went up so high, I don’t know how I pay for this and stay in my home.’ ”

For those 48,000 that would pay the capital gains tax, she said, “I don’t believe any of them will lose their homes over this.”

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